Posts Tagged Economic growth

In an AP Fact Check released this past week-end, the Associated Press reported that, contrary to popular arguments put forward by the Republican party, the problem with the lagging US economy is not spending but is, in fact, related to the lagging US economy.

In their concisely worded AP Fact Check release, the AP noted:

“This disparity between what comes in and what goes out .. reflects the mathematical reality that during recessions, tax revenues go down sharply because people and companies make less money and so pay less in taxes. Federal spending goes up… with an increasing demand for government help from food stamps and unemployment compensation and other safety-net programs. At the same time, the negative economic growth associated with recessions lowers the GDP number on the bottom of the equation, further boosting the ratio of spending to GDP.”

In other words, revenue goes down because less revenue comes in and government spending goes up because the government spends more. As a direct result, spending to GDP ratios look bad.

Noted Dreadmonger consulting economist, Dr. Paul Grunder commented on the report, saying, “We see this pattern repeating historically in each cycle. Not to get too technical but, as capital inflows decrease, we see less money coming in. Similarly, as more capital is spent, we see a corresponding increase in spending. This is often difficult for the layperson to grasp as it may be somewhat counterintuitive to those not schooled in economic theory.”

The AP Fact Check went on to quote noted Democratic strategist Mark Mellman, “If the economy starts to get better, then everything gets better.”

LONDON (Dreadmonger) – Global stock markets tumbled again this week as officials from Morgan Stanley lowered their forecasts for global growth for 2011 and 2012. An unnamed Morgan Stanley official, in an exclusive interview with Dreadmonger’s London Bureau, said, “This really sucks. We are close to running out of adjectives to describe how bad this sucks. No doubt.”

The spokesman for the brokerage firm went on to say that increasing commodity prices, a weakened dollar, and continuing political and social tensions around the globe combined to paint a bleak economic outlook for the next two years.

The spokesman said that both the U.S. and European economies are “hovering dangerously close to recession.” As a result, the firm has cut its 2011 global gross domestic product growth forecast to 3.9% from 4.2%, and its 2012 estimate to 3.8% from 4.5%.

Paul Krugman, Nobel prize winning economist and op-ed columnist for the New York Times, commented, “To say that the ‘economy sucks’ doesn’t really capture the gravity of the situation. I think these guys need to go back to the OED or something. This came out of the London office, right? Pitiful, really, that the vocabulary coming from this eminent financial institution has devolved to street language. It embarrasses us all and coarsens the discussion.”

The Morgan Stanley spokesman further commented on Mr. Krugman’s statement by saying, “Well, you can tell Mr. Krugman that Morgan Stanley says he sucks, as well. He’s the Nobel Prize-winning economist, isn’t he? If we go back to his forecasts, of, oh, say 2007, what do we see? And, how’s that Keynsian stimulus program working out for you, Paul?”

Krugman responded by telling Dreadmonger reporters, “What, some low-level PR guy from this esteemed issuer of countless Mortgage Backed Securities, this company that JP Morgan refused to take for nothing back in 2008, thinks it is in his purview to smear me, a Nobel Prize-winning economist and op-ed journalist for the New York Times, with his punk-a** gutter-language? Not likely.”

Dreadmonger is unable to print the response from Morgan Stanley to Mr. Krugman in this family friendly publication.

Dreadmonger will continue to closely monitor the story and provide updates as they become available.